I have experienced the problem with both IE and with Firefox. I'm running windows XP.

I managed to play with some of the settings I had on this site and have fixed the problem. Under the control panel there is a link to "edit options". Near the bottom of that theres a "misc options" section that lets you select the type of editor you want to use. I had it set to the highest setting, the "enhanced interface." Once I switched that to the standard editor, everything seems to work fine now (the smileys still show up too).